Kreston GTA
April 11, 2024
April 11, 2024
Pretino Albury, Partner at Kreston Bahamas, brings over a decade of expertise, serving clients in The Bahamas, Caribbean, and the USA. As a CPA, he specialises in management consulting, risk advisory, public accounting, and auditing across diverse industries.
March 17, 2024
Sector: Finance
Pretino Albury, Partner at Kreston Bahamas, contends that tax advisers must not overlook cryptocurrency with BEPS compliance, if they aim to cultivate more profound connections with their clients, in a recent article for ITR (International Tax Review). Click here to read the full article or read a summary down below.
Dealing with decentralised cryptocurrencies in the absence of global tax standards is challenging. With the worldwide rollout of the OECD’s BEPS framework, advisers and clients must collaborate to formulate an effective strategy. Robust policies aligning with international standards are essential to ensure compliance and minimise risks in cryptocurrency transactions. Below are critical considerations for crafting such policies.
Understand BEPS implications for cryptocurrency transactions by familiarising yourself with OECD guidelines, particularly Actions 10, 13, 5, and 15. Consult with clients to gather information on their cryptocurrency business activities, transactions, and risk appetite. Conduct thorough risk assessments, addressing transfer pricing and cross-border transactions. Implement a transparent transfer pricing model and design policies to handle hybrid mismatches in cross-border cryptocurrency transactions. Establish a BEPS-compliant KYC process for crypto transactions, including identity verification, beneficial owner identification, risk assessments, and ongoing customer activity monitoring. Mandate proper disclosure, robust record-keeping, and precise procedures for identifying, reporting, and paying taxes on cryptocurrency-related income.
Integrate risk mitigation into policies by developing strategies to identify and counter suspicious activity, protecting against fraud, theft, and regulatory sanctions. Include clear procedures for reporting suspicious activity, robust anti-money laundering programs, and legal expertise to prevent asset seizure. Implement cybersecurity measures to safeguard against cyberattacks and unauthorised access.
Educate client personnel comprehensively on the newly implemented cryptocurrency policies to ensure an understanding of requirements and risks. Provide training on the rationale behind each approach and their role in implementation and adherence.
Continuously check and review compliance by establishing a system to monitor adherence to the BEPS-compliant cryptocurrency policy. Stay updated on evolving regulations and tax laws, regularly reviewing and updating client policies to ensure ongoing compliance with changing rules and standards.
Utilise tech tools for efficiently monitoring cryptocurrency transactions, employing advanced technologies and analytics to trace transaction history and identify potential risks like money laundering and tax evasion. These tools can detect anomalies, assign risk scores, and enable real-time monitoring for immediate identification and recording of suspicious activity. Additionally, technology aids in staying updated on evolving rules and regulations across jurisdictions, ensuring accurate and timely tax calculations, payments, and reporting through AI, blockchain, and cloud systems.
Maintain open communication and collaboration with tax authorities to align cryptocurrency policies with expectations, preventing unforeseen issues and demonstrating commitment to compliance.
Building BEPS-compliant cryptocurrency policies is an ongoing process, requiring continuous collaboration and adaptation to the evolving cryptocurrency landscape. Advisers must partner effectively with clients for the long term, implementing and maintaining robust policies. By following these steps, advisers can navigate the complexities of cryptocurrency taxation, minimize BEPS risk, and strengthen client relationships in a landscape with an estimated 420 million crypto users worldwide.
Interested in doing business with Kreston Global? Click here to get in touch.
Herbert M. Chain is a highly experienced auditor and is a financial expert with over 45 years of experience in business, accounting, and audit, having served as a Senior Audit Partner at Deloitte. He holds certifications from the National Association of Corporate Directors and the Private Directors Association, with knowledge of private company governance and effective risk management. He has extensive knowledge in the financial services sector, including asset management and insurance. Herb is a member of MHM’s Attest Methodology Group and serves as Deputy Technical Direct of Kreston Global’s Global Audit Group.
March 12, 2024
In his comprehensive overview, Herbert M. Chain from MHM explores the recent updates to SAS 143 and SAS 145, which signify significant milestones in auditing standards. Read the full article here, or the summary below.
The issuance of SAS No. 143, focusing on Auditing Accounting Estimates and Related Disclosures, and SAS No. 145, centered on Understanding the Entity and Its Environment and Assessing Risks of Material Misstatement, represents a significant advancement in auditing standards. These standards offer auditors extensive guidance for testing accounting estimates, particularly those involving fair value, and outline essential requirements for grasping the entity’s internal control system. This is crucial in navigating the complexities of the contemporary economic, technological, and regulatory accounting environment.
Effective for audits of periods ending on or after Dec. 15, 2023, SAS 143 mandates a deeper examination of uncertainties in accounting estimates, focusing on potential management bias. This involves a thorough evaluation of assumptions, especially for significant judgments like fair value measurements. The standard necessitates a detailed risk assessment tailored for complexities in auditing accounting estimates, providing guidance on responsive audit procedures, including assessing the suitability of valuation models and data integrity for fair value estimates. SAS 143 aims to enhance transparency and accountability in fair value estimation, ultimately improving the quality and reliability of these estimates for increased stakeholder trust.
Key changes to auditing standards in SAS 143 include a heightened emphasis on auditors addressing estimation uncertainty and exercising professional skepticism in evaluating fair value estimates. The standard mandates a more detailed risk assessment process tailored for complexities in auditing accounting estimates, particularly fair value estimates. Additionally, auditors must assess the reasonableness of accounting estimates within the financial reporting framework, ensuring compliance with permitted methods, assumptions, and data.
SAS 143 brings substantial changes to the audit process in assessing fair value estimates. The focus now shifts to understanding factors and assumptions behind estimates, demanding greater transparency and accountability from management. Auditors, in response, perform the following procedures:
SAS 145, also effective for audits for periods ending on or after Dec. 15, 2023, revises aspects of the risk assessment process, focusing on an entity’s internal control system. Notably, it enhances auditor responsibilities related to evaluating the design and implementation of controls, including IT general controls (ITGC). The standard recognises the increasing significance of an entity’s IT environment, requiring auditors to identify and assess ITGCs, categorised into four domains:
While not all domains may be applicable annually, SAS 145 mandates evaluating design and implementation for relevant ITGCs within the applicable domain for each identified significant IT application. The standard also introduced the concept of a continuum of inherent risk as well as other changes.
If you are interested in doing business with Kreston Global, contact us here.
Pretino Albury, Partner at Kreston Bahamas, brings over a decade of expertise, serving clients in The Bahamas, Caribbean, and the USA. As a CPA, he specialises in management consulting, risk advisory, public accounting, and auditing across diverse industries.
February 16, 2024
Sector: Finance
Pretino Albury, Partner at Kreston Bahamas, contends that tax advisers must not overlook cryptocurrency with BEPS compliance, if they aim to cultivate more profound connections with their clients, in a recent article for ITR (International Tax Review). Click here to read the full article or read a summary down below.
Dealing with decentralised cryptocurrencies in the absence of global tax standards is challenging. With the worldwide rollout of the OECD’s BEPS framework, advisers and clients must collaborate to formulate an effective strategy. Robust policies aligning with international standards are essential to ensure compliance and minimise risks in cryptocurrency transactions. Below are critical considerations for crafting such policies.
Understand BEPS implications for cryptocurrency transactions by familiarising yourself with OECD guidelines, particularly Actions 10, 13, 5, and 15. Consult with clients to gather information on their cryptocurrency business activities, transactions, and risk appetite. Conduct thorough risk assessments, addressing transfer pricing and cross-border transactions. Implement a transparent transfer pricing model and design policies to handle hybrid mismatches in cross-border cryptocurrency transactions. Establish a BEPS-compliant KYC process for crypto transactions, including identity verification, beneficial owner identification, risk assessments, and ongoing customer activity monitoring. Mandate proper disclosure, robust record-keeping, and precise procedures for identifying, reporting, and paying taxes on cryptocurrency-related income.
Integrate risk mitigation into policies by developing strategies to identify and counter suspicious activity, protecting against fraud, theft, and regulatory sanctions. Include clear procedures for reporting suspicious activity, robust anti-money laundering programs, and legal expertise to prevent asset seizure. Implement cybersecurity measures to safeguard against cyberattacks and unauthorised access.
Educate client personnel comprehensively on the newly implemented cryptocurrency policies to ensure an understanding of requirements and risks. Provide training on the rationale behind each approach and their role in implementation and adherence.
Continuously check and review compliance by establishing a system to monitor adherence to the BEPS-compliant cryptocurrency policy. Stay updated on evolving regulations and tax laws, regularly reviewing and updating client policies to ensure ongoing compliance with changing rules and standards.
Utilise tech tools for efficiently monitoring cryptocurrency transactions, employing advanced technologies and analytics to trace transaction history and identify potential risks like money laundering and tax evasion. These tools can detect anomalies, assign risk scores, and enable real-time monitoring for immediate identification and recording of suspicious activity. Additionally, technology aids in staying updated on evolving rules and regulations across jurisdictions, ensuring accurate and timely tax calculations, payments, and reporting through AI, blockchain, and cloud systems.
Maintain open communication and collaboration with tax authorities to align cryptocurrency policies with expectations, preventing unforeseen issues and demonstrating commitment to compliance.
Building BEPS-compliant cryptocurrency policies is an ongoing process, requiring continuous collaboration and adaptation to the evolving cryptocurrency landscape. Advisers must partner effectively with clients for the long term, implementing and maintaining robust policies. By following these steps, advisers can navigate the complexities of cryptocurrency taxation, minimize BEPS risk, and strengthen client relationships in a landscape with an estimated 420 million crypto users worldwide.
Interested in doing business with Kreston Global? Click here to get in touch.
Gary Klintworth, a seasoned financial executive with 25+ years of experience in industry, accounting, leadership and business development, currently serves as Senior Managing Director at CBIZ ARC Consulting. In this role, he leads multiple engagement teams and provides technical expertise to pre-IPO and public companies across various industries.
February 9, 2024
Sector: Technology, Media & Telecom
The initial public offering (IPO) window offers a pivotal opportunity for companies aiming to go public. With the market showing signs of revival, businesses must ensure their financial foundations are robust and ready for the challenges and opportunities of going public. This guide, authored by Gary Klintworth, (a Senior Managing Director at CBIZ), has extensive experience in financial consulting and IPO preparation. This brief guide outlines essential steps to ensure your company is well-prepared for the IPO window.
The IPO window refers to the period when market conditions are favourable for companies to go public. Investor optimism, stable economic conditions, and a receptive stock market characterise it. During this window, companies can achieve higher valuations and receive a warm welcome from investors. Timing the market correctly is crucial, as the window can close due to economic downturns, regulatory changes, or shifts in investor sentiment.
Before embarking on the public path, it’s imperative to gather a team capable of managing the new demands of public company operations, including SEC filings, financial projections, and audits. In an inflationary environment, starting early with the right advisors can save costs and build a strong foundation for your public journey.
Transitioning to public company standards requires a rigorous approach to financial reporting. Closing the books with precision and preparing for SEC filings demand a level of accuracy and timeliness unfamiliar to most private companies. Implementing software tools and conducting dry runs of reporting processes can smooth the transition.
For a company preparing to go public, the integrity of its data is paramount. Efficient systems and reliable APIs are crucial for managing the volume of post-IPO data and ensuring accurate forecasting and reporting to the market.
A successful IPO is not just about the numbers; it’s about telling your company’s story compellingly. Aligning key metrics with the narrative of your business’s current and future success is essential for engaging investors and underwriters.
The period leading up to an IPO is an ideal time to explore growth strategies and cost-saving measures. Balancing the pursuit of growth with the necessity of profitability and positive cash flow is vital in today’s cautious investment climate.
“Preparing for an IPO isn’t just about getting it right for day one,” notes Bradley Coleman, underscoring the importance of strategic planning for the days following the IPO. A successful transition to a public entity involves a continuous commitment to strategic growth, operational excellence, and financial integrity.
As the IPO window reopens, the readiness of your company plays a critical role in seizing the opportunities ahead. By focusing on financial fundamentals, strategic planning, and effective communication, businesses can navigate the complexities of going public with confidence. Gary Klintworth’s insights provide a valuable roadmap for companies aiming to thrive in the public market.
For more insights and guidance on navigating the IPO process, get in touch.
February 6, 2024
Sector: ESG
Experts in our ESG committee assess the development of ESG in North America, examining the effects of new legislation and how it is changing doing business in the region during the early months of 2024.
In March 2022, the SEC proposed rules to enhance and standardise climate-related disclosures for investors that would apply to all SEC registrants. Issuance of the final rule has been delayed multiple times due to the large amount of critical feedback received during the comment period, and is now expected by April, 2024.
Climate-related disclosure
Disclosures included in this new section on Form 10-K would address:
Footnotes to the audited Financial Statements
Disclosures in the in a footnote to the financial statement would provide financial statement metrics for climate-related events (e.g., severe weather) and transition activities (e.g., efforts to reduce GHG emissions). Such disclosures would also be subject to a registrant’s internal control over financial reporting (ICFR) and external audit.
Included on the SEC’s Rule Agenda for October 2023 is a proposed rule to enhance registrant disclosure regarding human capital management and is expected to explain what information companies need to include in Form-10K when discussing topics such as safety and diversity.
Included on the SEC’s Rule Agenda for April 2024 is a proposed rule to enhance registrant disclosure about the diversity of board members and nominees.
Under the proposed rule by the Federal Acquisition Regulation, federal contractors would be required to disclose their greenhouse gas (“GHG”) emission levels and set science-based reduction targets. There is no set date for the final rule; it could potentially be late 2023 or early 2024.
Contractors receiving between $7.5MM and $50MM in federal contracts (significant contractors) will be required to disclose their Scope 1 and 2 GHG emissions. Compliance timeline for reporting is one year from the final rule effective date.
Contractors receiving more than $50MM in federal contracts (major contractors) will be required to disclose their Scope 1 and 2 emissions and “relevant” Scope 3 emissions. Compliance timeline for reporting Scope 1 and Scope 2 emissions is one year from the final rule effective date and for Scope 3 emissions, two years from the final rule effective date. Additionally, major contractors will be required to disclose its climate-related financial risk factors and to develop science-based emissions targets. Compliance timeline is two years from the final rule effective date.
California issued three pieces of legislation into law in October 2023 that imposes climate-related disclosure obligations on companies with certain ties to California.
Voluntary Carbon Market Disclosures Act (AB 1305)
AB 1305 is focused on voluntary carbons offsets (“VCOs”) and related net zero claims. AB 1305 applies to entities that operate and make emissions claims within California or buy/sell VCOs within California, regardless of size or revenues.
The effective date of AB 1305 is January 1, 2024, with information updated at least annually.
Climate Corporate Data Accountability Act (SB 253)
SB 253 is focused on greenhouse gas (“GHG”) emissions reporting in compliance with the Greenhouse Gas Protocol (“GHG Protocol”). SB 253 applies to public and private U.S. companies with total annual revenue, regardless of where the revenue was generated (including revenue generated outside the United States) greater than $1 billion that “do business in California”.
Scope 1 and Scope 2 emissions
Companies will be required to publicly disclose its annual Scope 1 and Scope 2 GHG emissions in 2026 (on prior fiscal year information, i.e., 2025). Limited assurance is required initially, and reasonable assurance is required for 2029 information (filed in 2030).
Scope 3 emissions
Companies will be required to publicly disclose its annual Scope 3 GHG in 2027 (on prior fiscal year information, i.e., 2026).
Scope 3 emissions reporting will not be due until 180 days after Scope 1 and Scope 2 information is publicly disclosed. Limited assurance on Scope 3 emissions will be required beginning in 2030 (on 2029 information) but is subject to change pending further guidance.
Greenhouse gases: Climate-related Financial Risk (SB 261)
SB 261 is focused on climate-related financial risk reporting in line with the recommendations of the Task Force on Climate-Related Financial Disclosures. SB 261 applies to public and private U.S. companies with total annual revenue, regardless of where the revenue was generated (including revenue generated outside the United States) greater than $500 million that “do business in California”.
Companies meeting the reporting requirements of SB 261 are required to biennially prepare and publicly disclose a report detailing climate-related financial risks and measures adopted to mitigate climate-related financial risk.
There are no assurance requirements for SB 261. A company must make its report publicly available on its website by January 1, 2026, and biennially thereafter.
For more information on ESG, click here to view Kreston Global’s Sustainability Hub.
Herbert Chain is a highly experienced author is a financial expert with 40 years of experience in business, accounting, and audit, having served as a Senior Audit Partner at Deloitte. He holds certifications from the National Association of Corporate Directors and the Private Directors Association, with knowledge of private company governance and effective risk management. He has extensive knowledge in the financial services sector, including asset management and insurance, and experience with SPACs.
Contact Herb here
January 23, 2024
On December 13, 2023, the US issued the final accounting standards for Crypto Assets. The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-08, titled “Accounting for and Disclosure of Crypto Assets”, an amendment of FASB Codification Intangibles—Goodwill and Other— Crypto Assets (Subtopic 350-60), to address the accounting challenges posed by cryptocurrency. The ASU aims to enhance accounting procedures and disclosure requirements for certain crypto assets, providing a more transparent view for investors, creditors, and other users of financial statements prepared by organizations with holdings of crypto assets.
As desired by many users and preparers of such financial statements, the new standard departs from the historical “cost less impairment” accounting model for crypto assets, requiring entities to measure qualifying assets at fair value with changes recognized in net income. In the ASU, the FASB noted that “accounting for only the decreases, but not the increases, in the value of crypto assets in the financial statements until they are sold does not provide relevant information that reflects (1) the underlying economics of those assets and (2) an entity’s financial position.”
The ASU also mandates disclosures about significant crypto asset holdings, contractual sale restrictions, and reporting period fluctuations to provide investors with comprehensive insights. To be subject to these amendments, crypto assets must meet specific criteria, including meeting the definition of an intangible asset as defined by FASB, not providing the asset holder with enforceable rights to or claims on underlying goods, services, or other assets, being created or residing on a distributed ledger based on blockchain or similar technology, being fungible, secured through cryptography, and not created by the reporting entity.
There are certain implications on businesses’ operations and recordkeeping resulting from the pronouncement. Fair value measurement introduces the need to stay informed about market prices and markets, and to report the impact of price fluctuations on financial performance. The detailed disclosures now mandated will require organizations to maintain comprehensive records of crypto transactions, and real-time tracking and valuation systems will be necessary to meet reporting demands.
Entities are expected to comply with the new standards for fiscal years starting after December 15, 2024, with early adoption permissible for yet-to-be-issued financial statements. The changes, if adopted in an interim period, must be retroactively applied from the start of the fiscal year.
For more advice on the recent update from the FASB, please get in touch.
Rob McGillen is the Chief Innovation Officer at CBIZ Financial Services with 25+ years’ working with innovative companies. Focus includes Professional Services, Financial Services, Manufacturing, Health and Life Sciences, Technology / SaaS, Insurance, and Energy.
January 17, 2024
Sector: Technology, Media & Telecom
Rob McGillen, Chief Innovation Officer at CBIZ Financial Services, was recently featured in an article for AAT Magazine on the impact that AI is having on the accounting workforce. Click here to read the full article, or read a summary below.
The accounting sector is swiftly embracing Artificial Intelligence (AI), with the Big 4 (Deloitte, PwC, Ernst & Young, and KPMG) leading the charge. The Institute of Analytics (IoA) recognises accountants as strategically positioned to address the AI skills gap.
While the Big 4 invest in and experiment with AI tools, the broader UK business landscape needs to be adopted faster. According to a 2022 report on AI activity in UK businesses, only 15% currently use AI to some extent, with 2% piloting AI technologies and an additional 10% planning future adoption.
Despite this, the potential benefits of AI in accounting, including predictive analysis, AI-enabled document reviews, natural language processing, AI-assisted forecasting, and audit automation, are significant. Dr. Clare Walsh, Director of Education at IoA, emphasises the value of AI technologies in providing more significant insights amid the shift towards automation and the demand for accurate, real-time data.
In exploring how smaller practices leverage AI, we delve into the AI technologies accountants are testing and the tangible benefits emerging for professional practices.
Rob McGillen noted that the shift from exploratory to demonstrable prompts involves upskilling professionals through prompt engineering training and demonstrations, fostering adoption within accountancy practices. Rob addresses AI challenges with practical, prompt building, custom instructions, and private data sets. Emphasising the need for the right tool for specific tasks, he acknowledges the evolving nature of the field, requiring continuous focus and updates.
Generative AI enhances efficiency by minimising time spent on lower-impact tasks, enabling professionals to focus on insightful analysis and application of expertise. Overall, the verdict is positive, highlighting AI’s role in improving document and template generation for increased work process efficiency.
If you are interested in implementing artificial intelligence in your business, please contact us.
December 20, 2023
July 1, 2023, marked a significant milestone for The Bahamas’ business community with the enactment of the Business Licence Act, 2023. This act not only replaces the old licensing legislation but introduces a fresh, more comprehensive regulatory framework. This shift, steered by the Department of Inland Revenue (DIR), aims to streamline and modernise the process of obtaining and maintaining business licenses in The Bahamas.
Read the full Bahamas Business Licence Act 2023 factsheet here
Small businesses, often the backbone of the economy, receive a welcome simplification. If your business earns less than $250,000 annually, you’re now exempt from submitting an independent accountant certification to the Secretary. Yet, keeping accurate records for at least five years remains vital, and the annual license renewal process continues as usual.
For those in the middle tier, there’s an added layer of accountability. You’ll need an independent accountant’s review report, aligned with the International Standards on Review Engagements (ISRE 2400 revised).
The bigger players in the market are required to obtain an independent accountant’s audit report, following International Standards on Auditing (ISA).
The new act isn’t just about licensing. It brings into play broader disclosure requirements, ensuring businesses are transparent about their revenue streams, deductions, related party transactions, and accounting policies. This transparency is key to maintaining a fair and competitive market.
The Bahamas Institute of Chartered Accountants (BICA) is at the forefront of this transition. Under the guidance of Pretino Albury, BICA President and Attestation & Assurance Leader at Kreston Bahamas, the institute is actively liaising with the government to ensure these changes benefit both businesses and the economy.
The act also touches on International Business Companies (IBCs) and financial services entities. Those without domestic operations and capped at a $100,000 tax can now submit financial statements audited outside The Bahamas, easing their compliance burden.
Understanding and adapting to these changes is crucial for businesses operating in The Bahamas. For more detailed insight and guidance, contact Pretino Albury at Kreston Bahamas. Contact him at ppalbury@krestonbs.com or visit Kreston Bahamas for more information and assistance.
Herbert M. Chain is a highly experienced auditor and is a financial expert with over 45 years of experience in business, accounting, and audit, having served as a Senior Audit Partner at Deloitte. He holds certifications from the National Association of Corporate Directors and the Private Directors Association, with knowledge of private company governance and effective risk management. He has extensive knowledge in the financial services sector, including asset management and insurance. Herb is a member of MHM’s Audit Methodology Steering Committee.
Contact Herb here
Guillermo Narvaez is a Tax Partner at Kreston FLS Mexico City Office and the Technical Tax Director, Global Tax Group, Kreston Global and member of the International Fiscal Association (IFA). Guillermo is a tax expert on international taxation, corporate taxes, transfer pricing, mergers and acquisitions, corporate reorganisations and litigation.
Within international taxation, Guillermo specialises in the analysis and interpretation of treaties to avoid double taxation applied to international transactions.
Contact Guillermo here.
September 8, 2023
In a recent article exploring global cryptocurrency accounting and tax standards in Bloomberg Tax, Herbert M. Chain, Deputy Technical Director of Kreston Global Audit Group and Shareholder, Mayer Hoffman McCann P.C., and Guillermo Narvaez, Technical Tax Director at Kreston Global Tax Group and Tax Partner, Kreston FLS, delve into the difficulties of codifying digital assets within the scope of existing accounting standards. You can read the full article on Bloomberg Tax, or read the summary below.
On September 6 2023, the Financial Accounting Standards Board (FASB) approved new rules for accounting for cryptocurrencies. The standard requires crypto assets to be measured at fair value each reporting period, while also requiring enhanced disclosures for annual and interim reports. The rules will be effective for 2025 annual reports, but may be adopted for earlier periods. The FASB expects to formally issue the standard by year-end. On the taxation front, crypto assets are considered personal property, subject to capital gains tax. The U.S. Internal Revenue Service recently proposed new regulations set to come into effect in 2026, with a focus on simplifying tax filings and curbing evasion.
The authors highlight that there is currently no unified global framework to govern cryptocurrencies due to the divergence in local criteria, with China, Japan, Canada and the EU offering no classification. The tax treatment varies from jurisdiction to jurisdiction, often classifying crypto as personal property, intangibles, or other asset classes for tax purposes. The lack of consensus extends to valuation models, though countries like the U.S., UK, and Australia propose fair value accounting.
When it comes to regulation, the global scene is diverse and regulators worldwide find themselves in a difficult position. Guidelines must be robust enough to address the inherent risks of this fast-evolving sector, without curbing its innovative potential. The urgency of these efforts has been underscored by recent setbacks in the crypto space, including the collapse of the FTX digital currency exchange platform. Such incidents have heightened concerns and accelerated regulatory initiatives.
In the United States, the government has released “The Administration’s Roadmap to Mitigate Cryptocurrencies’ Risks,” a comprehensive guide addressing issues surrounding protection and enforcement. Meanwhile, the European Union has made strides in creating a unified regulatory framework through its recently adopted Markets in Crypto Assets (MiCA) rules. Not to be left behind, Canada has also stepped into the regulatory arena by issuing its first set of federal guidelines.
As nations continue to take individualistic or collective strides, the onus remains on stakeholders to remain updated and adaptable, ensuring compliance while optimising opportunities.
Cross-border transactions of crypto assets also present unique tax implications. With no uniform classification of digital assets as currencies, existing double taxation treaties play a pivotal role in determining tax liability.
Navigating the maze of global tax and accounting rules for cryptocurrencies is not straightforward, but Double Tax Treaties (DTAs) offer some guidance. These treaties, modelled on a global standard, contain Articles 7 and 12, which help determine whether income from selling a crypto asset counts as a “business profit” or a “royalty.”
Article 7 applies when you Are making money from ongoing operations in another country, but only if you have a stable, permanent business there. Article 12 comes into play when you get paid for allowing, among others, the use of an intangible asset like a cryptocurrency.
Countries often hold back some tax right at the source when a royalty payment is involved. So, figuring out whether your crypto sale is a business profit or a royalty is crucial. Business profits are usually taxed in your home country unless you have a permanent operation in a foreign country. Royalties, on the other hand, can be taxed right where the payment originates.
Cryptos are intangible, just like a piece of copyrighted software. However, there is debate around whether just using the software counts as “use of copyright,” which is what traditionally triggers a royalty tax. Typically, you would need to have in-depth control or rights over the software for it to be considered a royalty.
Think of it like this: If you buy off-the-shelf software, you are paying for the use of the software itself, not the underlying algorithms or any other intellectual property. Therefore, this payment is not considered a royalty. Likewise, if you are simply buying or selling cryptocurrencies, and not tapping into its underlying algorithm for further financial gains, it may not count as a royalty either.
What is the practical impact? If your crypto income is not a royalty, you might escape withholding tax in the other jurisdiction, as per Article 7. This is especially significant given crypto assets’ growing market capitalisation, which currently hovers around $1.2 trillion.
As cryptocurrencies continue to disrupt traditional financial systems and gain economic relevance, the regulatory landscape is ever-changing. Whether it is accounting standards or tax treatments, differences exist across countries—from complete bans to open-armed acceptance. It is crucial, then, to consult experts to understand how each jurisdiction treats crypto assets, as global policies are far from settled.
Boasting a global market cap nearing $1.2 trillion as of July 2023 (Rashi Maheshwari, Why Is the Crypto Market Rising Today?, Forbes Advisor), the crypto asset sector has entrenched itself as a mainstay in the financial landscape. This is even though it is still short of its 2021 zenith of nearly $3 trillion (Davis Chu and Victoria Schumacher, A Deep Dive Into Crypto Valuation, S&P Global). The crypto world is undeniably impactful but is still in a phase where policies and frameworks are very much a work in progress.
As the regulatory landscape for crypto assets is still developing, with very different positions being taken across jurisdictions. Accordingly, seeking expert advice from accounting and/or tax advisors is vital.
If you have questions about crypto assets, accounting and taxation challenges and would like to speak to an expert, please get in touch.
August 30, 2023
Kreston BSG is hosting a webinar on U.S. Market expansion for Latino entrepreneurs with guest speaker Veronica Quintana, Leader of the Latin-Owned Business Practice at CBIZ MHM. The webinar is on 7 September 2023 at 16:30 (Mexico Central Time) and will be held in Spanish.
Latinos own nearly 5 million businesses in the U.S. and account for over $800 billion in revenue. If you’ve ever thought about taking your business across borders and stepping into the lucrative U.S. market, now is the perfect opportunity. Kreston BSG is thrilled to partner with CBIZ in the United States for a webinar aimed at guiding entrepreneurs through the tax and legal implications of starting or expanding a business in North America.
Leader of the Latino-Owned Business Practice at CBIZ & MHM, Veronica Quintana brings a wealth of knowledge and experience in navigating the U.S. market.
Legal-tax partner from Kreston BSG Mexico, Francisco Bracamonte, will serve as the moderator, steering the discussions towards actionable insights.
August 25, 2023
Herbert M. Chain is a highly experienced auditor and is a financial expert with over 45 years of experience in business, accounting, and audit, having served as a Senior Audit Partner at Deloitte. He holds certifications from the National Association of Corporate Directors and the Private Directors Association, with knowledge of private company governance and effective risk management. He has extensive knowledge in the financial services sector, including asset management and insurance.
Contact Herbert here
August 18, 2023
Recently, Herbert M Chain, Deputy Technical Director at Kreston Global Audit Group and Shareholder at Mayer Hoffman McCann P.C. spoke to Bloomberg Tax about a holistic approach audit companies must employ to support staff to identify financial fraud effectively. Read the full article or the summary below.
Recent data from the Public Company Accounting Oversight Board in the U.S underscores the correlation between firm culture and audit quality. The study highlights an alarming increase in audit deficiencies, set to climb for a second consecutive year. A significant 40% of these deficiencies in 2022 are linked to cultural aspects such as leadership’s commitment to superior audits, compliance, and staff churn.
At its essence, the culture of a firm serves as an unseen guiding hand, setting the tone for behavioural norms, professional duties, and interpersonal interactions. A perfect alignment of culture, values, processes, and training is imperative to empower auditors to address potential fraud risks.
In the world of auditing, ensuring that professionals are adept at pinpointing and addressing financial fraud is multifaceted. At its core, each auditor works within a framework of professional standards, controls, and strategies tailored to spot and react to fraudulent financial statements. This system—rooted in the culture of the auditing firm—is a cornerstone of the company’s quality control mechanism.
For auditors, embracing professional scepticism is non-negotiable. It emphasises a probing mindset and a scrupulous assessment of audit evidence—key to recognizing and countering potential fraud risks. Auditors, in every step of the process, are expected by regulators, stakeholders, and the public to apply this scepticism.
Auditors with sharp scepticism are not just passive observers. They actively hunt for signs of fraud and methodically inspect every piece of evidence. Their scepticism also helps in assessing managerial responses, ensuring they are not only rational but also evidence-backed. Both intrinsic scepticism and context-driven scepticism shape an auditor’s approach.
Elevating this sense of scepticism through training, awareness programs, and supervision can significantly enhance the trustworthiness of financial audit reports.
Drawing a line between financial statement auditing and forensic auditing is imperative. While the former is designed to offer an unbiased opinion on the authenticity of financial records, the latter digs deep into suspicions of fraud for legal documentation.
Auditors in financial audits maintain impartiality, while forensic auditors operate under a presumption of potential misconduct. It’s a delicate act for auditors to maintain objectivity, yet remain alert to discrepancies.
“Due care” is a revered principle in auditing, defining the expertise and diligence auditors should bring to the table. For auditors to be effective, they need expertise, awareness, and adequate oversight—this means entrusting complex evaluations to seasoned professionals rather than novices.
Cultivating a culture that champions learning is vital for auditors to counter financial fraud risks. Academic research supports the idea that well-trained auditors, equipped with fraud detection knowledge, are more sceptical, employ advanced methods, and stand a higher chance of identifying deceit.
When developing training programs, audit firms should:
With technology evolving rapidly, auditors can no longer afford to be on the sidelines. Forensic data tools are increasingly finding their place in the auditor’s arsenal, especially in cases with high fraud concerns. Similarly, AI-powered systems, like expansive language models, are being harnessed to spot and analyze potential fraud.
Turning a blind eye to these developments is perilous. It’s imperative for firms to integrate these tools into their strategy and train their team accordingly.
Mastering data analytics is crucial. By scrutinizing transactional data, algorithms can pinpoint anomalies like unforeseen revenue fluctuations or dubious transactions. Alongside this, auditors need a grasp on data visualization, statistical techniques, and data mining.
The power of AI can’t be ignored. AI can process vast data amounts, spot patterns, and offer invaluable insights. It’s essential for auditors to have a robust understanding of AI technologies. But, it’s also vital to be aware of its limitations, ensuring AI is used judiciously and its outcomes critically examined.
July 17, 2023
If you are planning on investing in North America in 2023, Kreston Global has launched a comprehensive guide to expanding into the North America region with the new publication, “North America”. This inaugural edition of “Doing Businesses in North America”, written by Kreston Global experts within the region, offers invaluable advice on navigating the market requirements in this region, and setting up investors for success.
Kreston Global has an impressive footprint in the North American region, with over 50 offices and more than 6,500 staff to support businesses expanding into the US, Canada and the Bahamas.
Incorporating one of the leading advisory and assurance organisations in the United States, CBIZ/MHM, as a member of our network, along with our Canadian firm Kreston GTA and our Bahamian firm, Kreston Bahamas, we offer North American clients and new market participants access to extensive expertise and regional coverage. In this edition of “Doing Business in North America,” we look into the evolving banking sector in the Bahamas and forthcoming regulations surrounding cryptocurrencies, providing a comprehensive overview. Additionally, MHM’s President provides an insightful outlook on the audit sector, while CBIZ MHM’s innovation leaders share valuable insights on safeguarding the growth of your business for the future.
Dale Wilson is a seasoned professional with 15+ years of experience as an R&D-focused Electrical Engineering Specialist and 20+ years as a Firm Tax Director / Senior Tax Director / Tax Practice Leader / Technical Specialist in leading professional services organizations. He has a successful track record of partnering with corporate clients in various sectors, leveraging his expertise in the complex tax credit system to maximise benefits tailored to their unique needs. Dale excels in delivering tax claim solutions, earning trust and buy-in from high-level decision-makers. He has a strong reputation in (SR&ED) tax audits and appeals, with a 17-year record of near-universal client satisfaction and over $2 billion in successful technical claims.
July 11, 2023
Investing in Canada in 2023 is an interesting prospect. The status quo is no longer a viable option within Canada, as the economic environment, with high-interest rates and inflation, access to both investment and government funding is far more competitive in 2023. At the same time. many Canadian companies are increasing their R&D spend on targeted digital investments and governments are funding billions of dollars across many sectors, such as the capital-intensive semiconductor, EV, and component manufacturing, to address global chip shortages and the impacts of de-globalization, and the rapid transition from ICE to the evolving EV, energy and carbon neutral technologies. In 2023, the approaches businesses take to managing overall risks and funding will define their success.
Kreston GTA LLP works with leading global companies to help them expand their businesses within the Greater Toronto Area (GTA), nationally and internationally. They do this by utilising extensive industry-specific knowledge, specialised engineering and tax experience, and a tailored client-centric service approach, that maximises funding from all sources (investment tax credits, grants, and other incentives), engaging clients at all stages in their lifecycle from concept through to successful commercialisation. They work with clients in all sectors from general manufacturing, medical and professional corporations, and utilities to some of the leading IT, artificial intelligence, robotics, computer vision, semiconductor, life sciences and many others.
Kreston GTA works with clients in regional science and technology hubs, Universities and research facilities, from early stage to large multi-national companies. Through this work, they share a multi-sector industry view of the important challenges in the economy, tax implications, and deep industry knowledge, on how organisations can best evolve to achieve success.
The GTA is home to 38% of Canada’s business headquarters, produces 20% of the entire country’s GDP, and has a vast highly educated and diverse talent pool in many knowledge-based industries including artificial intelligence, interactive digital media, advanced manufacturing, healthcare, and EV technologies, and over 18 colleges and universities that drive major innovation and new immigrants and talent into the ecosystem. The region is also home to hardware and semiconductor-focused labs and many incubators, enabling the creation of transformative technologies in the future.
They work with clients to ensure an optimised funding model approach from all available sources of investment tax credits, grants, and other incentives with a targeted industry focus. The Canadian government programs are consistently among the most generous globally, however, they require industry and tax-specific knowledge on eligibility, financial benefits, and timing to achieve success. Typically, investment tax credits are determined based on qualifying work and expenditures incurred in the past and provide a relatively high certainty in funding outcome (foreign-owned companies receive up to 38 per cent of qualified labour expenditures, in most cases comprised of both refundable and non-refundable tax credits).
The firm provides clients with full service including audit support, with the highest acceptance rate (<4% audit rate, >99.9% acceptance rate) in Canada. Investment tax credits, particularly for foreign-owned firms, need to be analysed along with the corporate structure to ensure that the expected funding, which may be comprised of both refundable and non-refundable tax credits, can be effectively utilised. Grant funding and other incentives are based on intended future qualifying work, whereby once approved the target government entity along with the client shares in the overall expenditure funding. Grant funding and other incentives tend to be highly discretionary, and availability can be limited to only short periods.
If you would like to invest in Canada, please get in touch.
The US tax incentives process includes four main components: Pre-Proposal Planning, Incentives Proposal, Tax Incentive Application and Multiyear Compliance Process.
Pre-Proposal Planning is the process of determining what the company’s expansion looks like. Will the facility be heavy with capital investment or hire lots of employees? If so, how much investment and how many employees? Or will the US expansion by remote in nature and have a virtual office? The states are looking for a central facility from which the employees and investment will be based. So if the plan is to have minimal office space and for employees to work remotely from across the US, then there would be little if any tax incentives available. So, the company should determine “what are the most important drivers for this expansion?”
Incentives Proposal is where the company’s representative connects with the state tax authorities in the state or states that are under consideration for the project. The states will request fairly extension information from the company about the company’s background and the facts of the project. This negotiation process can take some time, from 2 weeks to 1 year depending on the project.
Tax Incentives Applications is the process after the acceptance of the Incentives Proposal where the company formally applies for participation in the various tax incentive programs.
Multiyear Compliance Process – some companies believe that the states will handle all of the compliance processes for them and just “send the company a check.” This is not the case. These incentive programs can have monthly, quarterly and/or annual compliance reports associated with them. If you miss a report or a deadline, the incentives programs are in jeopardy of being forfeited.
Tax incentives vary widely by state. Some states have very few incentives and some states have very compelling incentive programs. The following is a partial list of incentive programs that may be available:
Depending on the company facts, a combination of these incentives can offset the expansion costs of a project by as much as 30%.
Some tax incentive programs now require hiring a certain percentage of minorities, providing internships, or other charitiable or serviced based activities.
State and local governments want to incent companies that will make investments in their communities, provide job opportunities for its population, pay higher than average wages and are quality members of the community. With the post-COVID tendency of remote work, this has caused some companies to have a model that doesn’t establish a connection with a particular community, instead having their employees work from home across the US. In the remote worker scenario, there are often few tax incentive opportunities, and if there are, the benefits aren’t typically worth the effort.
If you would like more information on tax incentives in the US, please get in touch.
CBIZ has recently unveiled the Latino-owned Business Service Team, launched to meet the demand for Spanish-speaking accounting services that is driven by a sizeable Latino business community in the United States.
Veronica Quintana, a Director and experienced Certified Public Accountant with a 27-year career in CBIZ’s Oxnard office in California, played a pivotal role in the development and launch of the Latino-Owned Business Service Team, which was held in Hollywood in May this year. Recognising the challenges faced by Latino entrepreneurs, Veronica developed the concept to bridge the gap in accounting services and empower the Latino business community. She said of her new venture,
“A lot of the Latino community is under-served. That is what I’ve noticed from the referrals I’ve received. They are used to working with a tax preparer who is not a CPA and maybe that was fine in the beginning when they first started, but then they grow.
What triggered my plans to develop this service is that I realised I was the only Latina in my office over a number of years, but now we see more Spanish speakers entering the accounting profession, so we’ve had more Latino staff available.
There is so much work out there one person can’t do it all, so this change meant we could expand. My main objective is being able to service them and do a good job.”
Veronica aims to tap into the substantial market potential, expand its reach beyond the borders of California, and empower Latino entrepreneurs by offering them access to qualified accountants fluent in both Spanish and English.
Veronica explained the structure behind the initiative, stating,
“We have identified CBIZ professionals nationally that speak both Spanish and English and across all the typical services as a business would need, such as audit, forensic accounting, and insurance valuation.
So now, when the need arises, when we have a client that is more comfortable speaking in Spanish we have a bilingual team which puts clients more at ease, rather than working with translators where some issues or nuances can be missed.
This way we can more effectively provide a service that they might need to grow their business. It has always been my goal to ensure every business client of mine is successful. If you are successful I feel like I’ve done something right. I’ve been the right partner for you.”
While the initial focus of the Latino-Owned Business Service Team is Southern California, Veronica’s vision extends far beyond regional boundaries. Together with Francisco Bracamonte, Kreston Global Board Director for Latin America and Partner at Kreston BSG in Mexico, and other members of Kreston Global, Veronica aims to support Latin American clients seeking expansion opportunities in the United States and beyond. This strategic collaboration not only enriches the resources available to Latino entrepreneurs but also facilitates cross-border business growth and strengthens economic ties between Latin America and the United States.
Veronica is really excited about this development, ” I had the pleasure of speaking to Francisco Bracamonte. He invited me to their quarterly meetings with other Latin American countries, which was my first exposure to the Kreston network in Latin America. Everyone was very gracious, and I had the opportunity to share a little bit about what I do.
As a result, Francisco has now invited me to the Kreston LatAm conference in Peru. I will be presenting on the services we offer, as we have numerous Latin American clients. There is a whole world beyond the United States, as some clients prefer to do business in their own countries or have connections there and want to expand into the US market.”
The launch of the Latino-Owned Business Service Team comes at a time when the entrepreneurial spirit within the Latino community is thriving. Latino business owners often possess a strong drive for success and are frequently involved in multiple business ventures simultaneously. Veronica highlighted this characteristic, stating,
“Latinos are entrepreneurs. They love to create new businesses, sometimes they’re just not satisfied with one!”
According to a study by the Stanford Business School, the United States is home to over 62.5 million Latinos, with an impressive economic output of $2.8 trillion. The entrepreneurial spirit within the Latino community has fuelled the establishment of nearly 5 million businesses, generating over $800 billion in annual revenue, highlighting the significant economic activity and potential within the Latino business sector.
The data from the Stanford Business School emphasises the importance of recognising and supporting Latino entrepreneurs. By acknowledging their contributions and understanding the unique challenges they face, initiatives like CBIZ’s Latino-Owned Business Service Team are crucial in supporting Latino business owners to achieve economic success.
While CBIZ has long been a trusted name in the financial services industry, Veronica’s dedication to serving the Latino business community has allowed her to establish strong connections and a loyal client base of Latino business owners.
Success stories exemplify the transformative impact of the Latino-Owned Business Service Team. One notable example is a client who began with a produce company and expanded into real estate investments. Recently, the client completed an event centre. Through comprehensive services such as tax advice, cost segregation studies, and succession planning guidance, Veronica supported her client to navigate the complexities of business expansion, maximizing the entrepreneurial potential of the business which was on the brink of collapse when he walked into her office.
Looking ahead, Veronica sees significant growth for the Latino-Owned Business Service Team. Her strategic vision involves expanding the team geographically to cover more regions across the United States. By collaborating extensively with Kreston firms and industry professionals, CBIZ aims to serve as a catalyst for the success and prosperity of Latino-owned businesses throughout the United States and beyond.
If you are looking for a Spanish-speaking professional accountant, get in touch.
With the promise of access to a large, open market, many businesses from around the world are interested in investing in the United States. And while global economic shocks in the last few years have certainly taken their toll, that interest has continued.
In 2023, the US ranked number one on the Kearney foreign direct investment (FDI) index for the 11th year in a row. Against a backdrop of global economic instability, the country’s market offers relative safety to cautious investors. As such, it’s seen a steady flow of investment and business expansion in the last few years, with FDI rates now 30% higher than they were pre-pandemic.
Tax specialists at CBIZ MHM, a top 10 US accounting and advisory firm, have noted the continued interest from overseas businesses in setting up in the US.
“I see a fair amount of inbound US investment and expansion from around the world in all different businesses, and all different industries. [In the last 12 months], I’ve seen that continuing,” says Don Reiser, an international tax specialist at CBIZ.
“I haven’t seen a significant slowdown. Obviously, with a slowing economy, you’re seeing maybe fewer M&A transactions. That’s not necessarily a reflection of the US; that’s a reflection of just transactions globally, affected by interest rates and other factors.”
Another possible reason for the continued expansion to the US may be the recent introduction of government incentives for investment, through legislation like the Inflation Reduction Act and the Bipartisan Infrastructure Law. Many states also have economic development incentives available to growing companies.
For businesses looking to capitalise on those advantages, there are some important decisions to make early on, including location, structure, business type, and plans for the future.
Tax incentives themselves are rarely the main driver for these choices. Rather, they need to be weighed up carefully in the context of other factors.
“When we look at incentives, I’ve had some clients ask, ‘what’s the best state?’ Well, it depends on the facts, so it’s really important for the client to have at least an idea of the geographic area in the United States that they’d like to locate to,” says Chris Baltimore, managing director of tax incentives at CBIZ.
“This might be based upon workforce or customer access, logistics or a number of things. But it’s really about understanding what kind of capital investment the client’s going to make and what their headcount growth looks like, because those are the two real driving factors of any incentive program.
“You have to look at the entire picture because every state has its own specific tax structure, and there are multiple types of taxes. For instance, Texas is popular because they don’t have a true state income tax; but the property taxes in Texas are high, and so while you save in one pocket, you have additional costs in another category.”
Kathy Rhodes, international tax specialist at CBIZ, says her number one recommendation for businesses setting up in the US is to understand the structure they want and how they plan to get money out: do you plan on reinvesting the money, getting dividends, or having management fees or royalties, for example?
These questions lead into considerations about another major consideration – transfer pricing. The US has a heavy focus on the rules around transactions within multinational companies, and, as such, Rhodes says this is one of the biggest issues businesses starting in the US run into.
“I always tell people, countries expect to have their fair share of the profits. So, if the company’s in the UK and now they’re opening up a sales branch in the US, then the US would expect that sales branch to generate a profit, whereas the UK company would like to drain all the profit off because it was taxed at 19% previously, while the corporate tax rate in the US is 21%.
“So you might want to save tax by getting a management fee or similar to the UK. But transfer pricing says no, you can’t do that: there ought to be a certain amount of profit based on what you do and the risks that each of you assume.”
The complex set of rules that govern these transactions can be a barrier to entry for some international businesses, with costly transfer internal pricing studies required to avoid problems or IRS penalties down the line. This becomes more important the more established the US arm of your business becomes, but it’s a good idea to consider it from the start.
Another major challenge for businesses new to the states is the complexity of the US tax system itself.
“The US presents unique challenges due to its federal and state tax systems,” says Reiser. “Many countries only deal with their federal tax systems, but in the US, we have to navigate both federal and state taxes. Each state has its own tax rules, and companies need to comply with them. Understanding state tax rules adds complexity to the overall process.”
For instance, while a European company might be used to applying VAT rules – and perhaps dealing with cross-border transactions and international tax treaties – many are unfamiliar with the US sales tax system and the way it applies across different states.
To handle this complexity, Reiser notes that businesses’ best course of action is to rely on the expertise of professionals in this area.
“I think you really need, in advance, to engage your accountants and your lawyers to talk through the business and structuring so that when you enter, you have a pretty good handle on what you’re facing,” he says. “Then you can sort out the issues among your advisors. To me, that’s the lesson.”
With over 50 offices across the US, CBIZ MHM has a specialist team to support international investors to make the right decisions for their business. With 6,500 personnel, they are confident they can support with a national level of expertise, as Kathy can attest,
“In our office, we are organised into different industry teams, and specialisms— software developers make up a significant portion of my clientele. However, I also have clients in the retail and wholesale sectors. If we lack expertise in a particular area, we have colleagues located throughout the United States and various offices who can provide the necessary knowledge and support to help navigate the state regulations and get the best outcome for the client.”
If you are interested in investing in the United States, please get in touch.
Leveraging data, automation and AI has emerged as a transformative tool that can provide a competitive edge. A self-described land of opportunity, the US often tops the lists as the most attractive country to invest in. As the largest economy in the world, over 25% larger than China, the US is home to 33 million businesses, with an attrition rate of one business in every five failing in the first year. In such a bustling market, a clear competitive edge is crucial.
Kreston Global’s firm in the US, CBIZ MHM, ranked the 10th largest firm in the US by International Accounting Bulletin, is rising to the challenges of economic uncertainty, supply chain issues, and rapid technological advancements. They are at the front of the pack in the race to develop AI and data-driven client services.
We wanted to find out more and spoke to CBIZ’s Chief Innovation Officer, Rob McGillen, and National Leader of Advisory Practice, Thomas Bonney, CPA, about this exciting development. Technology’s importance will accelerate. The future of business within the US is undeniably tied to data gathering and digital transformation and as the use cases and applications increase in complexity, the implementation track is increasing in simplicity and is more available to the middle market than it has ever been.
Just as you’ve heard and probably experienced, American small businesses have weathered “cascading economic storms over the past five years,” to quote the US Chamber of Commerce. These storms have included supply chain disruptions, staffing shortages, inflation, and of course, Covid-19.
Nevertheless, amidst these challenges, businesses have used technology to improve efficiency, reach customers, and gain deep and comprehensive insights from a wealth of data. To compete, and indeed to survive, companies of all sizes need to accelerate their adoption of technology and integrate the technology into all business processes, particularly in the US
Thomas Bonney, National Advisory Lead at CBIZ MHM, regularly shares his 30 years of experience in strategy, business transformation, and investment with the broader business community, predicting future trends and advising clients on where to focus efforts. Tom gave us his view,
“CBIZ is at the forefront of innovation, particularly at the intersection of data, automation, and AI. Rob McGillen’s focus on establishing a centre of excellence for digital data services as an advisory practice aligns closely with our vision. We are actively collaborating to develop client-centred solutions and use cases that leverage these advancements.”
Rob McGillen, Chief Innovation Officer at CBIZ, emphasises how businesses can use artificial intelligence (AI) to improve their operations, likening it to a “lightning bolt”.
“As part of our digital transformation strategy, we have successfully upskilled 200 data specialists in the past year. The investment in upskilling and data analytics tools has yielded significant returns, with a return on investment of 10x to 15x per person. The math is simple, and the value proposition is clear, not only to CBIZ as a service provider, but also to our clients as we share this knowledge to improve their business processes.”
In the coming decades, organisations that effectively combine data and AI to transform customer and employee experiences will not only survive but thrive. The future success of businesses hinges on their ability to gather insights from data with tools, including AI technologies.
Rob describes a recent instance when his team used AI to complete a financial analysis of a client that would have taken “three people three weeks to do”. The result? An analysis “equal to or better than” the work of a “20-year veteran” in just a minute and a half. This compresses weeks’ worth of work into just a few minutes, showcasing the power of automation and AI.
“However, for firms still reliant on traditional billing models based on hourly rates, this rapid transformation presents an existential crisis. As the effort required to deliver services diminishes from hours to seconds, new economic models and billing strategies must be adopted for continued viability.”
Adaptation and evolution are essential for long-term success in the changing landscape of business. AI can do a lot for businesses, from automating certain financial tasks and analysing data for trends to handling customer inquiries and creating forecasts. These are things that humans can do, but the beauty of AI lies in how quickly it can process data, allowing you to focus on your core business.
But you can also use AI to simplify aspects of business you may never have considered before, such as recruitment. Rob shared an experiment he did, where he used ChatGPT to create a job description and some auto-generated CVs.
He then asked the generative AI to evaluate the candidates and create five topics that should be on an interviewer’s list of key things to discuss. “It was spot on. It was like ‘the candidate demonstrates the following characteristics that align well”. So, think outside the box to see where AI and technology more generally can help you streamline your processes.
While AI can offer valuable insights and streamline processes, it should not entirely replace human financial advisers. After all, business finance involves complex emotions, nuanced decision-making, and unique circumstances that require human empathy and understanding — all of which are needed during the tough times of 2023 and beyond.
Tom Bonney has an urgent plea for clients, “In the next 24 months, it will be crucial for companies to have advisors and access to information that can assist them in making optimal decisions despite imperfect and ever-evolving circumstances; the AI driven answers are only as valuable as the quality of the source data and the context into which the data is used to drive change.
He sees a future where data, AI and a collection of professional advisors will provide the optimal odds that business executives get the big decisions right, over time.
“There are nuances to doing business in the US and your advisors, understanding the corporate goals and working with the clients and their data can get to an optimal solution.”
“By making informed choices, businesses will gain institutional confidence and a clear direction for investment in the period spanning from 2025 to 2030.”
Starting a business in the US is an exciting idea, but one packed with challenges. However, the future of doing business in the US looks bright, with the use of technology ramping up and the regulatory environment remaining stable.
Artificial Intelligence, a lightning bolt in this digital age, continues to redefine traditional processes, offering unprecedented opportunities for efficiency, insight, and transformation.
While Tom, Rob and the teams they are setting up at CBIZ across the country remain excited at the potential of the support they can give clients navigating this ever-evolving landscape, there is still room left for good instinct, great advice and solid planning, Rob explains,
“Our technology focus at CBIZ Financial Services is shifting quickly from ‘same’ to ‘transform’ as our clients are facing economic headwinds and seeking efficiencies in their own business. Technology is the wheel on which business turns, accelerating every season, and our clients are themselves continuously considering new ways to find value with tech-enabled solutions
We have set corporate policies now to manage the risks and missteps and learning each week new ways to leverage. What will be fascinating over the next 12 months will be the adoption rate and embrace of Generative A.I. in commercial products we all leverage (including Microsoft and other tax and audit solutions).
My best advice to those entering the market is to consider how you want to navigate the shifting US economic conditions and seek a combined view from experts. There is never a perfect time to expand, and approaching the opportunity with a partner which offers innovative ways of serving a multi-national client is a great step forward!”
If you would like to learn more about using data, AI and automation to give your business competitive edge, get in touch.